Significant Points Regarding Exports In GST Regime :

Exports of goods have always been given priority and adequate exemptions from the indirect taxes in order to promote them by the Government of India as well as the State Governments . The GST regime is also no exception to this concept to promote the exports as this is instrumental in fetching the foreign currency to this country . It is significant to note that in the GST regime the periphery of exports has been enlarged with the inclusion of services and as such adequate provisions have been envisaged in this regime to administer and regulate the exports of goods as well as export of services .

Following Points are to be remembered in respect of exports in GST Regime :

1- Exports are zero rated in the GST regime . “Zero Rated Supply ” has been defined in section 16 of the IGST Act , 2017 . A plain reading of this section makes it quite evident that in GST regime all export supplies shall not attract any tax however input tax credit shall be available in respect of goods or services or both as the case may be , which have been exported .

There is difference between nil rated or exempt supplies and zero rated supplies . In case of nil rated or exempted supplies there is no tax on such supplies but no input tax credit is available in respect of goods or services or both as the case may be , which has been supplied whereas in case of zero rated supplies e.g. export supplies , there is no tax on supplies but input tax credit is available in respect of the goods or services or both as the case may be which have been exported .

2- Sub-section (5) and sub-section (6) of section 2 of the Integrated Goods and Services Tax Act , 2017 define “export of goods ” and “export of services ” in the following manner-

 “2(5) “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India;” 

“2(6) “export of services” means the supply of any service when,–– 

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;”

       Thus from the aforesaid definitions it is quite evident that the “export of goods” with grammatical variations and cognate expression , means a supply by which any goods have crossed the custom frontiers of India and are destined to a place outside the territory of India .

    However to understand export of services it is pertinent to understand the provisions embodied in Explanation-1 of section 8 which reads as follows –

“Explanation 1.––For the purposes of this Act, where a person has,––

• an establishment in India and any other establishment outside India;
• an establishment in a State or Union territory and any other establishment outside that State or Union territory; or
• an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory,

then such establishments shall be treated as establishments of distinct persons.”

       Thus to constitute  export of services following conditions must be  satisfied –

• the supplier of services should be located in India .
• the recipient of services should be located outside Indiae. in a country other than India .
• the place of supply should be outside India . It is pertinent to note that place of supply of service shall be outside India as per the provisions embodied in section 13 of the Integrated Goods and Services tax Act , 2017 .
• the payment for such services should have been received by the supplier of service in convertible foreign exchange; and
• the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;”

3- Section 13 of the IGST Act , 2017 deals with the provisions relating to place of supply of services where location of supplier or location of recipient is outside India . This section clarifies that except for the cases embodied in sub-section (3) to sub-section (13) of this section the place of supply shall be the location of recipient of services . Thus in general where the supplier of services is in India and the recipient of services is located outside India except for the cases mentioned in sub-section (3) to (13) of section 13 , the place of supply of services shall be the location of the recipient .

4- It is pertinent to note that sub-section (3) to (13) of the aforesaid section embodies following supplies :

1. • Supplies of services in which the related goods are required to be made physically available by the recipient of services to the supplier of services. In this case the place of supply shall be the location where the services are actually performed .

1. • Services supplied require physical presence of the recipient with the supplier for supply of services. In this case the place of supply shall be the location where the services are actually performed .

1. • Supply of services relating to immovable property including services supplied in this regard by experts and estate agents and supply of accommodation by a hotel , inn , guest house , club etc . In this case the place of supply shall be the place where the immovable property is located.

1. • Supply of services by way of admission to or organization of cultural , artistic , sporting , scientific , educational or entertainment  event or a celebration , conference , fair , exhibition or similar events or their ancillary cervices . In this case the place of supply shall be the place where the event is actually held .

1. • Services supplied by a banking company or a financial institution or a non-banking financial company to account holders . In this case the place of supply shall be the location of supplier of services .

1. • Services consisting of hiring of means of transport including yachts but excluding aircrafts and vessels upto one month . In this case the place of supply shall be the location of supplier of services.

1. • Supply of services of transportation of goods other than by way of mail or courier . In this case the place of supply shall be place of destination of such goods .

1. • Supply of services in respect of transportation of passengers  . In this case the place of supply shall be the place where the passenger embarks on the conveyance for a continuous journey .

1. • Supply of services provided on board a conveyance during the course of passenger transport operation . In such cases the place of supply shall be the first scheduled point of departure of that conveyance for the journey .

1. • Supply of services pertaining to online information and database access or retrieval services . In such cases the place of supply shall be the location of recipient of services .

5- It is pertinent to note that the requisite of furnishing a bond for executing exports without payment of integrated tax has been replaced by letter of undertaking by the Working Partner , the Managing Director or the Company Secretary or the Proprietor or by a person duly authorised by such Working Partner or Board of Directors of such Company or  Proprietor . To this effect Notification No. 37 / 2017 –Central Tax Dated 4^th October , 2017 envisages that-

• All registered person who intend to supply goods or services for export without payment of integrated tax shall be eligible to furnish a Letter of Undertaking in place of a bond .
• This facility of furnishing Letter of Undertaking shall not be available to those who have been prosecuted for any offence under the Central Goods and Services Tax Act , 2017 or the State Goods and Services Tax Act , 2017 or Integrated Goods and Services Tax Act , 2017 or any of the existing laws in force in a case where the amount of tax evaded exceeds two hundred fifty lakh  rupees.
• The letter of Undertaking shall be furnished on the letter head of the registered person , in duplicate , for the financial year in the annexure to Form GST RFD-11 referred to in sub-rule (1) of Rule-96A of the Central goods and Services Tax Rules , 2017 ( identical is the Rule 96A of the State Goods and Services Tax Rules , 2017).
• This Letter of Undertaking shall be executed by the working partner , the Managing Director or the Company Secretary or the Proprietor or by a person duly authorised by such working partner or Board of Directors of such company or proprietor as the case may be .
• Where the registered person fails to pay the tax due along with interest as specified under sub-rule (1) of rule 96A of the Central Goods and Services Tax Rules , 2017 within the period mentioned in clause (a) or clause (b) of this sub-rule, the facility of export without payment of integrated tax will be deemed to have been withdrawn and if the amount mentioned in the said sub-rule is paid , the facility of export without payment of integrated tax shall be restored .
• It has also been clarified that the provisions of this Notification shall mutatis mutandis apply in respect of zero-rated supply of goods or services or both made by a registered person ( including a Special Economic Zone Developer or Special Economic Zone Unit ) to a Special Economic Zone Developer or Special Economic Zone Unit without payment of integrated tax .

6- It is also pertinent to note that Sub-rule (1) of Rule 96A embodies following provisions :

“Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish , prior to export , a Bond or a Letter of Undertaking in Form GST RFD-11 to the jurisdictional Commissioner , binding himself to pay the tax due along with interest specified under sub-section (1) of section 50 within a period of –

(a)fifteen days after the expiry of three months from the date of issue of the invoice for export , if the goods are not exported out of India .

(b)fifteen days after the expiry of one year or within such further period as may be allowed by the Commissioner , from the date of issue of the invoice of export , if the payment of such services are not received by the exporter in convertible foreign exchange .

7- Thus any tax with the due interest shall have to be paid only in the aforesaid two cases mentioned in clause (a) and (b) and if the export is executed without the aforesaid  two discrepancies then no amount whatsoever will be required to be paid in case of exports .